monetary policy

Question 1

base rate
exapnsionery

Answer 1

main objectibe bringng diown the ir , infaltion target is 2%
lower ir lower cost of borrowing lower so incetive to borrow incteases so spend more and save less ad rises as cpnsumption rises
intrest rates on savong accpunts fall so inective to save reduces increasing cosnumption
5.25%

Question 2

def

Answer 2

gov policy taht controls the amount of money in an econ and how expemsive it is to brorrow money
involves man ipulating irs exch rates and restrictuon of money suplly

Question 3

contrcationry; causes ad to reduce

Answer 3

raising ir so ad comes down and inlaftion decreases by reduvin amount of money circluating ine con
raisning ir can promote more sustaibale borrowing
more affordable housing, increases cost of of ortages , cool demand for hosusing so reducing rate of growth of house prices more affordabel so redeuces wealth ineqaulity

Question 4

xchange rate

Answer 4

higher ir will will increases demanbd for strling from foreign investors resulsting in a stronger pound
if rates are higher than those in pther countries then obersea investors will want to place money in uk accounts to get a higher return this is called hot money
increase in ir will lead to an increase in exch rate as increased demand for sterlinh poujd

Question 5

quantotative easing

Answer 5

cb purchase [redominat amounts of gov bonds in order to stimualte econ activity , it is used to mitigate an econ recession when inflation is low or neg

Question 6

forward guidance

Answer 6

cpmmuniactionnfrom cb abt state of the econ and likely future cause of mometary policy attempst to influnece finavial decisioms of hosueholds by providomg a guide[ost of expevted path of ir